NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-559-701]
Final Negative Countervailing Duty Determination: Carbon Steel
Wire Rod From
Singapore
Friday, May 6, 1988
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AGENCY: Import Administration, International Trade
Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that no benefits which constitute bounties
or grants within the meaning of the countervailing duty law are
being provided to manufacturers, producers, or exporters in
Singapore of carbon steel wire rod (wire rod), as described in the
"Scope of Investigation" section of this notice.
EFFECTIVE DATE: May 6, 1988.
FOR FURTHER INFORMATION CONTACT:Carole Showers or Gary
Taverman, Office of Investigations, Import Administration,
International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW., Washington,
DC 20230; telephone: (202) 377-3217 or 377-0161.
SUPPLEMENTARY INFORMATION:
Final Determination
Based on our investigation, we determine that no benefits which
constitute bounties or grants within the meaning of section 303 of the
Tariff Act of 1930, as amended (the Act), are being provided to
manufacturers, producers, or exporters in Singapore of wire rod.
Case History
Since the last Federal Register publication pertaining to this
investigation [Preliminary Negative Countervailing Duty
Determination: Carbon Steel Wire Rod from Singapore (53 FR
5207, February 22, 1988)], the following events have occurred. We
conducted verification in Singapore of the questionnaire responses of
the Government of Singapore, National Iron and Steel Mills (NISM),
Kloeckner Pte. Ltd. (Kloeckner), and Mitsui & Co. Ltd. of Singapore
(Mitsui) from March 7-11, 1988. A supplemental response was
submitted by the respondents on March 21, 1988. Briefs were filed on
April 22 and 25, 1988.
Scope of Investigation
For the purposes of this investigation, the term "carbon steel wire
rod" covers a coiled, semi-finished, hot-rolled carbon steel product of
approximately round solid cross-section, not under 0.20 inch in
diameter, not over 0.74 inch in diameter, tempered or not tempered,
treated or not treated, not manufactured or partly manufactured, and
valued over or under 4 cents per pound. Wire rod is currently
classified under items 607.1400, 607.1710, 607.1720, 607.1730,
607.2200, and 607.2300 of the Tariff Schedules of the United States
Annotated and under items 7213.20.00, 7213.31.30, 7213.31.60,
7213.39.00, 7213.41.30, 7213.41.60, 7213.49.00, and 7213.50.00
of the Harmonized System.
Analysis of Programs
Throughout this notice, we refer to certain principles applied to the
facts of the current investigation. These general principles are
described in the "Subsidies Appendix" attached to the notice of
Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina: Final
Affirmative Countervailing Duty Determination and
Countervailing Duty Order (49 FR 18006, April 26, 1984).
For purposes of this final determination, the period for which we are
measuring bounties or grants (the review period) is calendar year
1986. Based upon our analysis of the petition, the responses to our
questionnaire, verification, and written comments from respondents
and petitioners, we determine the following:
I. Programs Determined not to Confer Bounties or Grants
We determine that bounties or grants are not being provided to
manufacturers, producers, or exporters in Singapore of wire rod
under the following programs:
A. Development Bank of Singapore Short-Term Trade Financing
Although not alleged by petitioners and not included in our notice of
initiation or preliminary determination, we found during verification
that the Development Bank of Singapore (DBS) offers short-term trade
financing. This facility is a line of credit available for financing import
and export transactions for periods of up to 90 days. We verified that
NISM, Kloeckner, and Mitsui had short-term trade financing from the
DBS outstanding during the review period. Government ownership or
control of a bank does not necessarily lead to the conclusion that the
bank is operating in other than a commercial fashion. Unless we are
investigating a loan program established by the government or
mandated by a government directive, it has generally been our
practice in this type of situation to analyze initially whether the bank
is operating as a commercial entity.
For example, in Final Affirmative Countervailing Duty
Determination: Industrial Nitrocellulose from France (48 FR 11971,
March 22, 1983), we examined two types of lending activities by
Credit National, a bank partially owned by the French government
which also accounted for a majority of the bank's directors. Loans
which were administered jointly by Credit National and the
government were subjected to the "specificity" and "benchmark" tests
usually employed by the Department, and were found to be
countervailable. For the other, "ordinary" loans made by Credit
National, we found that the terms were generally comparable to those
offered by commercial banks. Thus, we concluded that we did not
have reason to investigate whether individual loans made outside of
the government-directed programs conferred a subsidy.
In Final Negative Countervailing Duty Determination: Carbon
Steel Wire Rod from Singapore (51 FR 3357, January 27, 1986), we
found that "although the DBS was established in 1968 as a government
development bank, since 1973 it has functioned as an ordinary
commercial bank." Moreover, it was determined that the terms of the
long-term financing under investigation were similar to
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those offered by other commercial banks in Singapore.
Based on information gathered at verification in this investigation, we
found that the Government of Singapore is the majority shareholder
in DBS and controls three of the nine members of the bank's board of
directors. However, we also found that the bank continues to operate
as a profitable institution and that the terms of the short-term trade
financing were comparable to terms offered by other commerical
banks in Singapore. Therefore, we have no reason to believe that the
short-term trade financing offered by DBS constitutes a bounty or
grant to respondents or other borrowers.
B. Section 16 of the Income Tax Act (ITA)
The Economic Development Board (EDB) administers section 16 of
the ITA, which provides for an annual allowance of 3 percent plus an
additional initial allowance of 25 percent for the depreciation of
industrial buildings. We verified that these allowances are the
standard depreciation allowances permitted in Singapore and apply
to all types of industrial buildings, including buildings for research
and development (R&D). There is no evidence on the record that
these allowances are excessive for the steel industry. Therefore, we
determine that initial and annual allowances for industrial buildings
provided for under section 16 of the ITA are not countervailable.
c. Section 19A of the ITA
In 1985, the Government of Singapore instituted a system of
accelerated depreciation. Section 19A of the ITA, administered by the
EDB, allows a company to depreciate all capital expenditures over a
three year period, with the exception of automobiles and robotics.
Currently, an enterprise must choose between using section 19 of the
ITA (the normal depreciation schedule) or section 19A when
depreciating an asset for tax or financial purposes.
We verified that this provision applies to all capital expenditures,
except as noted above, and that it is available to all enterprises in
Singapore. Therefore, we determine that the accelerated depreciation
provided for under section 19A of the ITA is not countervailable.
II. Programs Determined Not To Be Used
Based on verified information, we determine that manufacturers,
producers, or exporters in Singapore of wire rod did not apply for,
claim, or receive benefits during the review period for exports of wire
rod to the United States under the programs listed below. These
programs were described in the preliminary determination in this
investigation unless otherwise noted. (Because the Economic
Expansion Incentives Act (EEIA) of 1967 was amended in 1985, the
numbers corresponding to certain section titles have been changed.
Therefore, the section numbers of the EEIA of 1967, which were used
in the preliminary determination, are listed below in parentheses
after the 1985 part numbers, where appropriate.)
A. Export Tax Incentives
1. Part VI (IV) of the EEIA as amended, Production for Export.
2. Part VII (IVA) of the EEIA as amended, International Trade
Incentives.
3. Part XI (VIB) of the EEIA as amended, Warehousing and Servicing
Incentives.
4. Section 14 (B) and 14(C) of the ITA, Double Deduction of Export
Promotion Expenses.
B. Other Tax Incentives
1. Part II (same number) of the EEIA as amended, Pioneer Industries.
2. Part IV (III) of the EEIA as amended, Expansion of Established
Enterprises.
3. Part VIII (V) of the EEIA as amended, Foreign Loans for
Productive Equipment.
C. Research and Development Incentives
1. Part III (IIA) of the EEIA as amended, Pioneer Service Companies.
2. Part IX (VI) of the EEIA as amended, Royalties, Fees, and
Development Contributions.
3. Part X (VIA) of the EEIA as amended.
Under Part X of the EEIA,
companies are granted a tax exemption on profits equal to a
percentage of the fixed investments in plant and equipment incurred
by a company on a project. Part VIA of the original EEIA (Part X as
amended) was found to be not countervailable in Final Negative
Countervailing Duty Determinations: Certain Textile Mill
Products and Apparel from Singapore (50 FR 9840, March 12,
1985) (Textiles).
The petition in this investigation included information concerning
certain R&D allowances provided by the Government of Singapore as
administered by the EDB. While the Department did not initiate an
investigation specifically on Part X of the EEIA, it did initiate on R&D
allowances in general. Respondents reported that R&D investment
allowances are provided for under Part X of the EEIA as amended and
stated that the companies under investigation did not use this
allowance for R&D purposes. Although this program was found to be
not countervailable in Textiles, we continued to investigate Part X
due to possible amendments concerning R&D investment allowances.
Therefore, in the preliminary determination in this investigation, we
determined that Part X was not used.
Although we found no new information at verification and petitioners
have not presented any new information which would cause as to
reconsider our determination in Textiles, we are not determining the
countervailability of Part X of the EEIA, as amended, for purposes of
wire rod because the respondents did not use the R&D part of this
program during the period investigation.
4. Sections 14(E) of the ITA, Double Deduction for Research and
Development.
5. Section 19(B) of the ITA, Writing-Down Allowance for Approved
Know-How and Patent Rights.
6. Singapore Science Council Research and Development Assistance
Scheme.
D. Government Financial Assistance
1. Monetary Authority of Singapore Rediscount Facility.
2. Singapore Economic Development Board Programs.
a. Capital Assistance Scheme
b. Product Development Assistance Scheme
c. Initiatives in New Technology
III. Program Determined Not to Exist
Based on verified information, we determine that the Development
Bank of Singapore Working Capital Loan Fund does not exist. This
program was described in the preliminary determination in this
investigation.
Interested Party Comments
Comment 1: Petitioners contend that NISM received countervailable
benefits for wire rod in 1986 and 1987 in the form of investment
allowances under Part X of the EEIA. Petitioners argue that any
benefits received under Part X are countervailable, whether they
were granted for R&D investments or other types of projects.
Petitioners contend that one factor the Department considers in
assessing specificity is the extent and manner of discretion exercised
by the government in making the program available. Because the
Government of Singapore exercises complete discretion as to the
projects approved and the percentage of an approved investment
eligible for the
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allowance under Part X, the specificity test is
met.
Petitioners further argue that the Department's verification reports
contain no information demonstrating that this program, as
administered, is provided to other than a specific industry,
enterprise, or group thereof. Finally, citing Cabot Corp. v. United
States, 664 F. Supp. 525 (1987) and Beker Industries Corp. v. United
States, 7 CIT 313 (1984), petitioners argue that the Department's
determination in Textiles is not relevant because this investigation
must be decided on the facts of record in this proceeding.
Respondents contend that Part X of the EEIA as amended was found
not to be limited to a specific enterprise or industry, or group of
enterprises or industries in Textiles and that an investigation of Part X
was initiated in this proceeding only with respect to R&D. They argue
that petitioners have presented no new information that would
suggest that the Department should review or reverse the Textiles
determination and that nothing on the face of the law or its operation
suggests that the program should be considered a countervailable
benefit.
DOC Position: See section II.C.3. of this notice.
Comment 2: Petitioners contend that NISM claimed and received
benefits under section 19B of the ITA for licensing and know-how fees
paid for a manufacturing process which petitioners claim is used in
the production of both wire rod and reinforcing bars. Petitioners
argue that, although benefits under this program may be generally
available to companies which meet the program's eligibility
requirements, since NISM is not eligible but did receive benefits, the
specificity requirement is satisfied. Petitioners further contend that,
despite the Government of Singapore's statement that it will disallow
the benefits NISM improperly received under the program after
completion of an audit, NISM did claim the allowance during the
review period.
Finally, petitioners state that the Department has addressed only the
R&D provision of this tax incentive and, since approval of application
for benefits is at the discretion of the Ministry of Trade and Industry,
all benefits received by NISM under this provision should be
countervailed.
Respondents contend that there is nothing on the record to suggest
that the allowance provided under section 19B should be considered
a countervailable benefit. These allowances are available to any
company which makes a payment for approved know-how or patent
rights and, therefore, are not countervailable. Respondents further
contend that, if the allowance is not properly claimed, an adjustment
to the company's tax liability will be made after the government's tax
audit.
DOC Position: At verification, we found that the allowance claimed by
NISM under this program was related to the production of reinforced
bars not to the production of wire rod. Therefore, for purposes of this
determination, we have found this program not to be used.
Comment 3: Petitioners contend that the DBS generally lends at the
prime rate plus a spread for short-term trade financing. Petitioners
argue that: (a) NISM received short-term trade financing from DBS
during the review period at an interest rate considerably lower than
the prime rate plus a spread, and (b) the interest rate NISM received
is not generally available to non-DBS owned entities and is
inconsistent with commercial considerations. Petitioners also
contend that the interest rate differential is the result of a decision by,
or at the direction of, the government to benefit specific companies in
which the Government of Singapore has direct or indirect equity.
Respondents contend that the DBS operates as a domestic
commercial bank extending credit on commercial terms to all
recipients. Respondents argue that the rate charged by the DBS is
pegged to the inter-bank rate, which is comparable to the rates
offered by other commercial lenders for short-term trade financing.
Further, respondents argue that similar rates were provided to Mitsui
and Kloeckner, companies unrelated to the DBS.
DOC Position: We verified that all three respondents, including those
in which the DBS does not hold any equity, received trade financing
from the DBS. See section I.A. of this notice.
Verification
We verified the information used in making our final determination in
accordance with section 776(a) of the Act. We used standard
verification procedures including meeting with government and
company officials, examination of relevant accounting records, and
examination of original source documents of the respondents. Our
verification results are outlined in detail in the public versions of the
verification reports which are on file in the Central Records Unit
(Room B-099) of the Main Commerce Building.
This determination is published pursuant to section 703(f) of the Act
[19 U.S.C. 1671b(f)].
May 2, 1988.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 88-10117 Filed 5-5-88; 8:45 am]
BILLING CODE 3510-DS-M